National Holdings Corporation (NASDAQ:NHLD) (“National” or the
“Company”), a leading full service independent brokerage,
investment banking, trading and asset management firm providing
diverse services including tax preparation, today announced its
financial results for the 2017 fiscal year.
Fiscal 2017 Financial Highlights:
- Record revenue of $189.9 million, versus $174.1 million for
fiscal 2016.
- Adjusted EBITDA increased to $11.5 million from $.7 million in
the prior year.
- Income before other income and income taxes of $8.0 million
versus a loss of $2.5 million in fiscal 2016.
- Income before income taxes of $16.6 million includes $8.6
million of other income, principally due to the change in the fair
value of warrants issued in fiscal 2016. This is a non-operating,
non-taxable earnings adjustment.
- Investment banking continued to produce excellent results,
generating $44.6 million of revenue, versus $34.9 million in the
prior year.
- Net dealer inventory gains improved to $15.1 million on the
increase in the value of the firm’s warrant portfolio during the
fiscal fourth quarter.
- Cash and cash equivalents of $27.9 million and no debt as of
September 30, 2017 versus $27.5 million as of the fiscal year-end
2016.
- Equity of $38.9 million as of September 30, 2017.
Management Commentary
Michael Mullen, Chief Executive Officer of National stated, “I
am extremely impressed by the progress we made in fiscal
2017. We hit record revenue of nearly $190 million, in part
fueled by a 28% increase in investment banking revenue, showing
clear demand from our clients.” Mr. Mullen continued, “In
addition to the positive revenue growth, our business has also made
many important strides forward, most recently with the expansion of
our management team. The quality of leadership executives
interested in joining our thriving company speaks volumes to the
success of our refocused business model. Fiscal 2017 was about
National reconnecting with our core competencies and our mission
statement of ‘Customers First’. I am confident the results seen in
fiscal 2017 are just the beginning for our company. With other
initiatives just starting to take shape, including the planned
expansion of our Capital Markets division to complement our strong
banking performance, as well as a renewed focus toward accretive
business acquisition, I look forward to an even more productive and
impactful fiscal 2018.”
Fiscal 2017 Financial Results
National reported fiscal year revenue of $189.9 million, up
$15.8 million or 9% over fiscal year 2016. Total expenses increased
$5.4 million or 3% to $181.9 million.
Revenue
Strong results were recorded across our major revenue
categories. The majority of the increase was recorded in
investment banking, which increased to $44.6 million in fiscal
2017, up $9.7 million, or 28%, on strong issuance across multiple
industries and the related continuing demand from our clients.
Net dealer inventory gains increased $5.2 million, to $15.1
million. While the markets in which the company trades
remained challenging in fiscal 2017, a significant increase in the
value of the firm’s warrant portfolio offset lower equity volume
executed and the impact of the continuing low interest rate
environment in fixed income securities traded.
Commissions and related revenue increased 1% to $104.2
million. While this increase is small versus the very
favorable equity markets in fiscal 2017, our overall product
offering diversification has yielded a more appropriate
distribution of results across revenue categories.
Investment advisory revenue increased $.5 million, to $14.5
million, up 3%. New account openings and strong markets have
contributed to consistent growth in this revenue category, and we
expect this to continue.
Tax preparation and accounting revenue declined to $7.4 million
in fiscal 2017 versus $8.3 million in the prior year. We have
implemented a continuous review of this business over the past
year, addressing unprofitable and marginally profitable
offices. The reduction in revenue is a direct result of
actions taken during the year.
Expenses
Total expenses increased to $181.9 million in the current fiscal
year, up $5.4 million (3%) over the comparative year.
Variable compensation expenses directly associated with overall
revenue generation were responsible for $4.1 million of this
increase.
Aside from the compensation expense increase noted, the majority
of our expense categories remained relatively unchanged.
Several significant items to note affected professional fees and
other administrative expenses:
- Professional fees declined $2.4 million from fiscal 2016.
Costs associated with the tender offer for National by Fortress
Biotech during fiscal 2016 increased this expense category in the
prior year period.
- Other administrative expenses increased $3.4 million. As
previously reported in our fiscal third quarter earnings
announcement, provisions for legal and arbitration costs increased
during that period; in addition, at this fiscal year-end, the firm
recognized a $1.1 million impairment of goodwill and intangible
assets.
Earnings
Income before other income and income taxes totaled $8.0 million
versus a loss of $2.5 million in fiscal 2016. Income before
income taxes of $16.6 million was positively impacted by $8.5
million, due to the change in the fair value of the firms warrant
liability, which decreased from the September 30, 2016 measurement
date. This positive adjustment is a non-operating, non-taxable
income adjustment and should be viewed as such.
Net income per share, basic and fully diluted, was $1.01 and
$1.00 respectively in fiscal 2017, versus a loss per share of $.45
in fiscal 2016.
Adjusted EBITDA increased to $11.5 million in the current year,
from $.7 million in fiscal 2016.
Balance Sheet
As of September 30, 2017 National had $27.9 million of cash and
cash equivalents, versus $27.5 million as of September 30, 2016.
The Company's balance sheet remains debt free.
About National Holdings Corporation
National Holdings Corporation (NHLD) is a full-service
investment banking and asset management firm that, through its
affiliates, provides a range of services, including independent
retail brokerage and advisory services, investment banking,
institutional sales and trading, equity research, financial
planning, market making, tax preparation, insurance, to
corporations, institutions, high net-worth and retail investors.
With over 900 advisors, registered reps, traders, sales associates
and corporate staff, National Holdings operates through various
subsidiaries including National Securities Corporation, National
Asset Management, Inc., National Insurance Corporation, vFinance
Investments, Inc., Gilman Ciocia, Inc. and GC Capital
Corporation. Formed as a holding company in 1999,
National Holdings’ largest subsidiary National Securities
Corporation has been in business since 1947. National Holdings is
headquartered in New York and Florida. For more information, visit
www.nhldcorp.com. Fortress Biotech, Inc. (NASDAQ: FBIO) through its
affiliate FBIO Acquisition, Inc., is a majority shareholder of
NHLD.
FORWARD-LOOKING STATEMENTS
This press release may contain certain forward-looking
statements. Any such statements, other than statements of
historical fact, are based on management’s current expectations,
estimates, projections, beliefs and assumptions about the Company,
its current and prospective portfolio investments, and its
industry. These statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, some of
which are beyond the Company’s control, difficult to predict and
could cause actual results to differ materially from those expected
or forecasted in such forward-looking statements. Actual
developments and results are likely to vary materially from these
estimates and projections as a result of a number of factors,
including those described from time to time in National’s filings
with the Securities and Exchange Commission. Such statements speak
only as of the time when made, and National undertakes no
obligation to update any such forward-looking statements, whether
as a result of new information, future events, or otherwise, except
as required by law.
CONTACTS:National Holdings Corporation:Michael
Mullen, Chief Executive
OfficerEmail: mm@nhldcorp.comTelephone: +1 212-417-8055
Investor Relations:Email: ir@nhldcorp.comTelephone: +1 212
554 4351
NATIONAL HOLDINGS CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION |
|
September 30, |
|
2017 |
|
2016 |
ASSETS |
|
|
|
Cash |
$ |
23,508,000 |
|
|
$ |
21,694,000 |
|
Restricted cash |
1,381,000 |
|
|
354,000 |
|
Cash
deposits with clearing organizations |
1,041,000 |
|
|
1,030,000 |
|
Securities owned, at fair value |
7,102,000 |
|
|
2,357,000 |
|
Receivables from broker dealers and clearing organizations |
2,850,000 |
|
|
3,357,000 |
|
Forgivable loans receivable |
1,616,000 |
|
|
1,712,000 |
|
Other
receivables, net |
5,180,000 |
|
|
5,430,000 |
|
Prepaid
expenses |
2,490,000 |
|
|
1,910,000 |
|
Fixed
assets, net |
2,397,000 |
|
|
1,164,000 |
|
Intangible assets, net |
4,843,000 |
|
|
5,704,000 |
|
Goodwill |
5,217,000 |
|
|
6,531,000 |
|
Deferred
tax asset, net |
6,420,000 |
|
|
8,958,000 |
|
Other
assets, principally refundable deposits |
353,000 |
|
|
345,000 |
|
Total
Assets |
$ |
64,398,000 |
|
|
$ |
60,546,000 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Liabilities |
|
|
|
Securities sold, not yet purchased at fair value |
$ |
151,000 |
|
|
$ |
298,000 |
|
Accrued
commissions and payroll payable |
10,065,000 |
|
|
11,940,000 |
|
Accounts
payable and other accrued expenses |
8,715,000 |
|
|
7,166,000 |
|
Deferred
clearing and marketing credits |
786,000 |
|
|
995,000 |
|
Warrants
issued in 2017 and issuable in 2016 |
5,597,000 |
|
|
14,055,000 |
|
Other |
181,000 |
|
|
319,000 |
|
Total
Liabilities |
25,495,000 |
|
|
34,773,000 |
|
|
|
|
|
Stockholders’ Equity |
|
|
|
Preferred
stock, $0.01 par value, 10,000,000 shares authorized; none
outstanding |
— |
|
|
— |
|
Common
stock $0.02 par value, authorized 75,000,000 shares at September
30, 2017 and 150,000,000 shares at September 30, 2016; 12,437,916
shares issued and outstanding at September 30, 2017 and 2016 |
248,000 |
|
|
248,000 |
|
Additional paid-in-capital |
66,955,000 |
|
|
66,353,000 |
|
Accumulated deficit |
(28,315,000 |
) |
|
(40,843,000 |
) |
|
|
|
|
Total National Holdings
Corporation Stockholders’
Equity |
38,888,000 |
|
|
25,758,000 |
|
|
|
|
|
Non-controlling interest |
15,000 |
|
|
15,000 |
|
Total Stockholders’
Equity |
38,903,000 |
|
|
25,773,000 |
|
|
|
|
|
Total Liabilities and Stockholders’
Equity |
$ |
64,398,000 |
|
|
$ |
60,546,000 |
|
NATIONAL HOLDINGS CORPORATION AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS |
|
Years Ended September 30, |
|
2017 |
|
2016 |
|
|
|
|
Revenues |
|
|
|
Commissions |
$ |
96,807,000 |
|
|
$ |
95,942,000 |
|
Net
dealer inventory gains |
15,108,000 |
|
|
9,929,000 |
|
Investment banking |
44,595,000 |
|
|
34,937,000 |
|
Investment advisory |
14,528,000 |
|
|
14,080,000 |
|
Interest
and dividends |
2,764,000 |
|
|
3,109,000 |
|
Transfer
fees and clearing services |
7,393,000 |
|
|
7,152,000 |
|
Tax
preparation and accounting |
7,439,000 |
|
|
8,294,000 |
|
Other |
1,236,000 |
|
|
633,000 |
|
Total
Revenues |
189,870,000 |
|
|
174,076,000 |
|
|
|
|
|
Operating
Expenses |
|
|
|
Commissions, compensation and fees |
155,187,000 |
|
|
151,057,000 |
|
Clearing
fees |
2,343,000 |
|
|
2,309,000 |
|
Communications |
2,767,000 |
|
|
3,157,000 |
|
Occupancy |
4,286,000 |
|
|
3,819,000 |
|
Licenses
and registration |
1,726,000 |
|
|
1,625,000 |
|
Professional fees |
4,531,000 |
|
|
6,896,000 |
|
Interest |
14,000 |
|
|
51,000 |
|
Depreciation and amortization |
1,229,000 |
|
|
1,213,000 |
|
Other
administrative expenses |
9,819,000 |
|
|
6,418,000 |
|
Total Operating
Expenses |
181,902,000 |
|
|
176,545,000 |
|
Income (Loss)
before Other Income and Income Taxes |
7,968,000 |
|
|
(2,469,000 |
) |
|
|
|
|
Other
Income |
|
|
|
Gain on disposal of
Gilman branches |
137,000 |
|
|
— |
|
Change in fair value of
warrants |
8,458,000 |
|
|
— |
|
Other income |
16,000 |
|
|
— |
|
Total Other
Income |
8,611,000 |
|
|
— |
|
Income (Loss)
before Income Taxes |
16,579,000 |
|
|
(2,469,000 |
) |
|
|
|
|
Income tax expense |
4,051,000 |
|
|
3,090,000 |
|
Net Income
(Loss) |
$ |
12,528,000 |
|
|
$ |
(5,559,000 |
) |
|
|
|
|
Net income
(loss) per share - Basic |
$ |
1.01 |
|
|
$ |
(0.45 |
) |
Net income
(loss) per share - Diluted |
$ |
1.00 |
|
|
$ |
(0.45 |
) |
|
|
|
|
Weighted
average number of shares outstanding - Basic |
12,437,916 |
|
|
12,435,923 |
|
Weighted
average number of shares outstanding - Diluted |
12,472,541 |
|
|
12,435,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation of net income as
reported in accordance with generally accepted accounting
principles, or GAAP, to EBITDA, as adjusted.
|
Fiscal Year Ended |
|
2017 |
|
2016 |
|
|
|
|
Net income (loss), as
reported |
$ |
12,528,000 |
|
|
$ |
(5,559,000 |
) |
Interest expense |
14,000 |
|
|
51,000 |
|
Income taxes |
4,051,000 |
|
|
3,090,000 |
|
Depreciation and
amortization |
1,229,000 |
|
|
1,213,000 |
|
EBITDA |
17,822,000 |
|
|
(1,205,000 |
) |
Non-cash compensation
expense |
602,000 |
|
|
211,000 |
|
Change in fair value of
warrant liability |
(8,458,000 |
) |
|
— |
|
Forgivable loan
amortization |
693,000 |
|
|
788,000 |
|
Impairment of goodwill
and intangible assets |
1,011,000 |
|
|
894,000 |
|
Gain on disposal of
Gilman branches |
(137,000 |
) |
|
— |
|
EBITDA, as
adjusted |
$ |
11,533,000 |
|
|
$ |
688,000 |
|
EBITDA, as adjusted for non-cash compensation expense, change in
fair value of warrant liability, forgivable loan amortization,
impairment of goodwill and intangible assets and gain on disposal
of Gilman branches is a key metric we use in evaluating our
business. EBITDA is considered a non-GAAP financial measure as
defined by Regulation G promulgated by the SEC.
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